If intrinsic value was the foundation upon which all monetary value is to be generated, it’s ironic to see that the object considered the ultimate source of intrinsic value--that is, Gold--must now appeal to legal procedure in order to secure its equivalence to paper money, an artificial proxy no longer backed by anything of real intrinsic value or substance.
But that procedure is taking place now in South Carolina with H.4678, a Legal Tender Act aimed at officially recognizing gold and silver as money. The house bill was introduced by Rep. Stewart Jones and was filed on November 20.
Language in H.4678 states that “gold and silver coins minted foreign or domestic shall be legal tender in the State of South Carolina under the laws of this State. No person or other entity may compel another person or other entity to tender or accept gold or silver coin unless agreed upon by the parties.”
If the bill passes into law, residents of South Carolina can use gold and silver to pay state debts and taxes. On a practical level, this makes both metals functionally equivalent to cash. Like other states aiming to pass similar bills, this act, if passed, would create a more competitive atmosphere for the US dollar. This last point is emphasized in the phrase “No person or other entity may compel another person or other entity to tender or accept gold or silver coin unless agreed upon by the parties.” In other words, both parties must agree to transact in gold and silver prior to any transaction taking place; otherwise, they default to cash.
Should the bill pass, South Carolina would join Utah, Wyoming, and Oklahoma in recognizing gold and silver as legal tender. To date, South Carolina has already nullified sales tax on metals. However, capital gains taxes on gold and silver are still in place. But once the bill passes, capital gains taxes will likely be repealed.
According to the Sound Money Defence League, “state laws that recognize gold and silver as money restore a government view of precious metals as the favored form of money – a currency rather than a piece of property or other assets. Using this logic, it would be inappropriate for a state to levy taxes when the precious metals are used or exchanged.”
Re-establishing legal tender status for gold and silver has been an active pursuit, but one that seemingly remains out of sight with regard to mainstream opinion. As strange as this pursuit may seem to citizens who are not aware of the long-term issues impacted by the absence of “sound money,” it may be something of a revelation to learn that such issues have been anticipated by the authors of the US Constitution when they wrote Article I, Section 10: “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”
Basically, everything that can go wrong when issuing currency without backing is plaguing the US as well as every other nation that issues money without any real substantive value.
One reason for this is central banks hold a monopoly over money. They are the only institutions authorized to issue currency and manipulate the money supply. This gives central banks an unequaled capacity to artificially shape the economy against its natural cycle, one shaped by the needs and activities of its participants--businesses, entrepreneurs, producers, and consumers.
On the federal level, South Carolina’s Legal Tender Act would help weaken the Federal Reserve’s monopoly over money, usurping the central bank’s powers from the bottom up, introducing the one factor that is so central and critical to a capitalistic free market system: competition.
Monopolies are generally bad for consumers--you’re stuck with whatever you’re given, at whatever price you’re quoted. We typically wouldn’t stand for this type of anti-competitive behavior in the markets, particularly with discretionary items. So, why should we accept it at the most foundational level--one that underpins our societal and economic framework...that is, our own domestic currency?